underlying the currently influential business and management theories. Ethics may be viewed as the study of human conduct with an emphasis on determination of right and wrong (Fraedrich and Ferrell, 1992). Together with this, it is the assumption that management must adhere to a narrow version of positivism that excludes any reference to intention” (Ghoshal, 2005). According to (Mallor et al., 2010), for centuries, religious and secular scholars have explored the meaning of human existence and attempted to define a “good life”. Ethical theories and principles are the foundations of ethical analysis because they are the viewpoints from which guidance can be obtained along the pathway to a decision. The four ethical theories according to the text are rights theory, justice theory, utilitarianism, and profit maximization.
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The rights theory covers a range of ethical philosophies that holds that certain human rights are important and must be respected by other society and her rights. Rights are also considered to be ethically correct and legitimate given that a large or ruling population endorses them. Few rights theorists are stringent deontologists, and one of the few is the 18th century philosopher by name Immanuel Kant and his theory is known as the Kantianism. Kant viewed humans as moral actors that are free to make choices and he also believed that humans are able to judge the morality of any action by applying his famous “categorical imperative”. One of his formulations of the categorical imperative is “Act only on that maxim whereby at the same time you can will that it shall become a universal law”. The meaning of it is that we judge an action by applying it universally. The most important strength of rights theory is that it protects fundamental rights, unless some greater right takes precedence. A major criticism of the rights theory deal with the near absolute yet relative value of the rights protected, making it difficult to articulate and administer a comprehensive rights theory.
The Justice theory which came into limelight by John Rawls in 1971 when he published his book entitled: A theory of Justice, the philosophical underpinning for the bureaucratic welfare state. He reasoned that it was right for governments to redistribute wealth in order to assist the poor and the destitute. Furthermore, Rawls expressed this philosophy in his Greatest Equal Liberty Principle: each person has an equal right to basic rights and liberties. He further limited the principle with the Difference Principle: social inequalities are acceptable only if they cannot be eliminated without making the worst-off class even worse off. Rawls’s justice theory has application in the business context which requires decision makers to be guided by fairness and impartiality. The strength of Rawls’s justice theory lies in its basic premise, the protection of those who are least advantaged in society. The ethical dilemma for managers is to determine the fair rules and procedures for distributing outcomes to stakeholders. Managers must not give people they like bigger raises than they give to people they do not like, for example, or bend the rules to help their favorites. On the other hand, if employees want managers to act fairly toward them, then employees need to act fairly toward their companies and work hard and be loyal. Similarly, customers need to act fairly toward a company if they expect it to be fair to them-something people who illegally copy digital media should consider. The criticism that justice theory with the rights theory is that it treats equality as an absolute, without examining the costs of producing equality, including reduced incentives for innovation, entrepreneurship and production.
Utilitarianism entails a decision maker to maximize utility for society as a whole. Maximizing utility means achieving the highest level of satisfactions over dissatisfactions which means that a person must consider the benefits and costs of her actions to everyone in society. A utilitarian will take action only if the benefits of the action to society outweigh the societal costs of the action. There are two types of utilitarianism, act utilitarianism and rule utilitarianism. Act utilitarianism judges each act separately, assessing a single act’s benefit and its cost to society’s members. Rule utilitarianism judges actions by a rule that over the long run maximizes benefits over cost. The strength of utilitarianism as a guide for ethical conduct is that it is easy to articulate the standard of conduct; which coincides with values of most modern countries like the USA who is capitalist in nature by focusing on total social satisfactions, benefits, wealth and welfare. In general under capitalism, the interests of shareholders are put above those of employees, so production will move abroad. This is generally regarded as being an ethical choice because in the long run, the alternative, domestic production might cause the business to collapse and go bankrupt. If this happens, all of the company’s stakeholders will suffer-not just its employees. According to the utilitarian view, the decision that produces the greatest good for the greatest number of people is best. In this case, that means outsourcing the jobs. The criticism of utilitarianism is that it is difficult to measure one’s own pleasures, pains, satisfaction and dissatisfaction, let alone those of all of society’s members.
Profit maximization as an ethical theory requires a decision maker to maximize a business’s long-run profits within the limits of the law. This has been based on the laissez faire theory of capitalism first expressed by Adam Smith in the 18th century and more recently promoted by economists such as Milton Friedman and Thomas Sowell. Profit maximization is closely related to utilitarianism, but it varies essentially in how ethical decisions are made. Profit maximization optimizes total social utility by narrowing the actor’s focus, requiring the decision maker to make a decision that merely maximizes profits for himself or his organization. The strengths of profit maximization results in ethical conduct because it requires society’s members to act within the constraints of the law and a profit maximizer, therefore, acts ethically by complying with society’s mores as expressed in its laws. The criticism of profit maximizer is that if profit maximization results in an efficient allocation of society’s resources and maximization of total social welfare, it does not concern itself with how wealth is allocated within Society.
An ethical theory that was not found in the text is that of rationalism, which this ethical theory focuses mainly on norms. The moral rationalism is that in which the decisive factor of the truth is not sensory but intellectual and deductive, and it has its major proponent in Emmanuel Kant (Llano, 2002). Mr. Kant attempted to change our everyday, clear, rational knowledge of morality into philosophical knowledge. He went after a technique of using “practical reason” to reach conclusions which are able to be useful to the world of experience. Kant is also known for his theory that there is a single moral obligation which he called the “Categorical Imperative”, and derived from the perception of duty. He further stated that these moral norms must be obeyed in all situations and circumstances if our behavior is to observe the moral law.
In a way to improve corporate governance and corporate social responsibilities, according to Mallor et al., 2010, one can modify the corporate governance model to educate, motivate, and supervise executives and thereby improve corporate social responsibility. Corporate governance is the structure used to direct and manage business and affairs of the company towards enhancing prosperity and corporate accountability. Corporate critics however did propose a wide rang of cures, all of which have been implemented to some degree and with varying degrees of success.
Ethical codes: Ethic codes in a way have been adopted by many large corporations and several industries to guide executives and other employees. The Sarbanes-Oxley Act required that a public company discloses whether it has adopted a code of ethics for senior financial officers, and to disclose any changes in the code or waiver of the code’s application. The codes can be viewed in two ways; one sees the codes as genuine efforts to foster ethical behavior within a firm or an industry while others view regards them as thinly disguised attempts to make the firm function better, to mislead the public into believing the firm behaves ethically, to prevent the passage of legislation that would impose stricter constraints on business, or to limit competition under the veil of ethical standards. Better ethical codes make clear that the corporation expects employees not to violate the law in a mistaken belief that loyalty to the corporation requires it. These kinds of codes work best, however, when a corporation also gives its employees an outlet for dealing with a superior’s request to do an unethical act.
Ethical instruction: Some corporate organizations require their employees to enroll in classes that teach ethical decision-making. The idea is that a manager trained in ethical conduct will recognize unethical actions before they are taken and deter herself and the corporation from the unethical acts. Majority of corporations in this present day express their dedication to ethical decision-making by an ethics officer who is not only responsible for ethical instruction, but also in charge of ethical supervision. The ethics officer tends to be a mentor or sounding board for all employees who face ethical issues.
Greater Shareholder Role in Corporations: As shareholders are the vital stakeholders in a corporation in a capitalist economy, several corporate critics argue that businesses should be more attuned to shareholders’ ethical values and that shareholder control of the board of directors and executives should be increased.
Evidence suggests that sources of ethical dilemmas will continue to increase. To understand this assessment, it will be useful to look at four categories of conditions influencing ethical behavior: global, social, organizational and individual.
Global: A variety of global conditions affect our lives and our society; many are well-known to all of us. They include the increasing influence of cultural values substantially different from those of our Anglo-Saxon heritage; impacts of a complex global economy on local economic structures; and our rapidly increasing technological capacity to communicate and interact with the global community. Within the past few years we have watched the beginning of the development of a new world order that will be substantially different from our sense of world order developed over the last half century. Among the implications resulting from this picture, two are especially important: (1) we as a people no longer have a secure sense of our role in the world or our control over it; and (2) it has become increasingly acceptable, and even logical, to admit that we simply “don’t know what the appropriate response is.” This era of rapid change has an indirect but important influence on our sense of ethical appropriateness.
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Social: A more direct source of ethical conflicts is social change. Change has been so rapid that some have argued that we have lost our sense of values or that we must seek better mechanisms to resolve value conflicts. This line of reasoning is incorrect for several reasons. First, value conflicts (and, therefore, ethical dilemmas) reflect our social and cultural fabric. Second, “stakeholders” have a relatively easy time gaining access to our policy making system; therefore, value conflicts are very visible and, frequently, cause our problem-solving process to forge slow, painful compromises. These processes continue to represent one of the great comparative advantages of our society and should not be changed without sober reflection.
Organizational: Thirdly, we are witnessing rapid change in the nature and role of the public organization and concepts about administrative behavior. Organizational values are vital influence on the majority of us; thus far our organizational lives are becoming increasingly participatory, open, communicative and interactive. While I believe that the decline of organization hierarchy is among the more positive aspects of our society, it also signals a decline in another source of behavioral guidelines. Individual judgment, group dynamics and social interactions are replacing traditional rules of behavior dictated by the organization. We are also facing increasing conflicts between the “bureaucratic ethos” and the “democratic ethos” (Hejka-Ekins, 1998). The bureaucratic ethos includes such traditional organizational standards as efficiency, competence, loyalty and accountability.
Individual: lastly, ethical anxieties are caused by changes at the individual level. In particular, individualism and materialism are at the present celebrated within major social institutions and have become a dominate ethos of the “baby bust generation.” Self-indulgence, greed, self-interest, and privatism are accepted components of the ethos of this generation (Frederickson, 1982).
In order to improve the ethical climate of an organization, management must effectively communicate proper ethical behavior throughout the organization. Wimbush and Shephard (1984: 637-647) reported that businesses annually spend an estimated $40 billion on the ethical behavior problems. Thus, pointing to the fact that ethical dimension of employees’ behavior has a clear impact on the profitability of the company. It is generally accepted that customer satisfaction is one of the most important factors in successful business strategy. Although a company must continue to develop, alter and adapt products to keep pace with customers’ changing desires and preferences. It must also seek to develop long-term relationships with customers and its stakeholders. By focusing on customer satisfaction, a company continually deepens the customer’s dependence on the company, and as the customer’s confidence grows, the firm gains a better understanding of how to serve the customer so the relationship may endure. Successful businesses provide an opportunity for customer feedback, which can engage the customer in a cooperative problem solving. As is often pointed out, a happy customer will come back, but a disgruntled customer will tell others about his or her dissatisfaction with a company and discourage friends from dealing with it. When an organization has a strong ethical environment, it usually focuses on the core value of placing customers’ interest first. An ethical culture that focuses on customers incorporates the interests of all employees, suppliers, and other interested parties in decisions and actions. Employees working in an ethical environment support and contribute to the process of understanding customers’ demands and concerns. Ethical conduct towards customers builds a strong competitive position that has been shown to affect business performance and product innovation positively.
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